Perfumania Holdings, Inc. (NASDAQ:PERF) (“Perfumania” or the
“Company”) a U.S. specialty retailer and distributor of fragrances
and related beauty products, today reported operating results for
the three and twelve months ended January 28, 2017.
($ in thousands, except per share data & percentage) |
Thirteen Weeks Ended |
|
|
|
Fiscal Year Ended |
|
|
January 28, |
January 30, |
|
|
January 28, |
January 30, |
|
|
|
2017 |
|
|
2016 |
|
Change |
|
|
2017 |
|
|
2016 |
|
Change |
Net sales retail |
$81,222 |
|
$97,310 |
|
(16.5 |
%) |
|
$237,297 |
|
$293,395 |
|
(19.1 |
%) |
Net sales wholesale |
|
60,301 |
|
|
65,163 |
|
(7.5 |
%) |
|
|
231,568 |
|
|
248,569 |
|
(6.8 |
%) |
Total net sales |
$141,523 |
|
$162,473 |
|
(12.9 |
%) |
|
$468,865 |
|
$541,964 |
|
(13.5 |
%) |
|
|
|
|
|
|
|
|
Gross profit retail |
$39,260 |
|
$49,172 |
|
(20.2 |
%) |
|
$116,791 |
|
$147,468 |
|
(20.8 |
%) |
Gross profit wholesale |
|
26,011 |
|
|
28,633 |
|
(9.2 |
%) |
|
|
104,541 |
|
|
110,156 |
|
(5.1 |
%) |
Total gross profit |
$65,271 |
|
$77,805 |
|
(16.1 |
%) |
|
$221,332 |
|
$257,624 |
|
(14.1 |
%) |
|
|
|
|
|
|
|
|
Gross profit margin |
|
46.1 |
% |
|
47.9 |
% |
(180 bps) |
|
|
47.2 |
% |
|
47.5 |
% |
(33 bps) |
Net (loss) income from operations |
|
($5,186 |
) |
$4,602 |
|
— |
|
|
|
($16,695 |
) |
|
($4,029 |
) |
— |
|
Net (loss) income |
|
($6,900 |
) |
$2,264 |
|
— |
|
|
|
($23,639 |
) |
|
($11,671 |
) |
— |
|
Net (loss) income per basic and diluted common share |
( $0.45 |
) |
$0.15 |
|
— |
|
|
|
($1.53 |
) |
|
($0.75 |
) |
— |
|
Michael Katz, President and Chief Executive
Officer of Perfumania, commented, "Fiscal 2016 marked a challenging
and transitional period for Perfumania. Our retail stores, in
particular at locations in malls and tourist-dependent areas, were
impacted by an intense promotional and competitive sales
environment, reduced foot traffic and weaker than expected consumer
spending. As a result of the ongoing headwinds, the Company has
undertaken an exhaustive review of its operations to effect the
significant changes needed to resolve the issues that challenge our
ability to achieve sustainable profitability. As such, we are
accelerating the closure of underperforming stores where we do not
see the potential for long-term growth and profitability. This
review, while on-going, has already resulted in the reduction of
our store footprint to 287 stores as of fiscal 2016 year end, and
since that time, we closed an additional 43 locations, amounting to
a reduction of over 20% of our retail store footprint.
“To offset the challenges we are facing at our
brick and mortar locations and with the rapidly increasing shift in
consumer shopping patterns out of traditional retail to e-commerce,
we are actively implementing initiatives that will afford us the
ability to gain added leverage from our e-commerce platform and
improve our utilization of social networking, mobile, and digital
applications to engage our customers. Increasing sales volume
through Perfumania's e-commerce platform is one of our key growth
initiatives and during fiscal 2017 we plan to strategically
allocate additional resources and focus on improving the overall
online shopping experience and identifying opportunities to
leverage digital technologies to enable Perfumania to more deeply
connect with our customers.
“In addition, we have recently undertaken an
exhaustive review of our human and infrastructure resources and
will be making the appropriate changes that are expected to yield
cost savings and better align our operational structure with the
changing market dynamics.
“As it relates to our product offering, we have
undertaken initiatives to drive efficiencies in promotional
spending and further diversify our sales mix as we continue to
emphasize a greater percentage of owned brands. The cornerstone of
our marketing philosophy for our Perfumania stores is to develop
consumer awareness that the stores offer an extensive assortment of
brand name and designer fragrances at discount prices.
Mr. Katz, concluded, “As we look ahead, we
understand that there is still much work to be done and that our
continued success in implementing our strategic changes is
imperative as we look to establish a foundation for sustainable
long-term growth.”
Operating ReviewNet sales
during the thirteen weeks ended January 28, 2017, decreased 12.9%
to $141.5 million, compared to $162.5 million in the fourth quarter
of fiscal 2015, reflecting a decrease in same store sales and lower
store count as the average number of stores operated was 292, or
8.2% less compared to 318 stores in operation in the prior year
period.
Retail segment net sales decreased 16.5% to
$81.2 million, compared with last year’s fourth quarter, due in
large part to overall lower foot traffic across Perfumania stores,
compared with last year’s fourth quarter.
Wholesale segment net sales decreased 7.5% to
$60.3 million during the fourth quarter of fiscal 2016 from the
fourth quarter of fiscal 2015 reflecting decreased sales for
Quality Fragrance Group of $3 million related to lower customer
demand and a decrease in Parlux sales of approximately $1.9 million
due to weaker consumer demand, principally in department
stores.
Gross profit during the fourth quarter of fiscal
2016 was $65.3 million, a decrease of 16.1%, compared to last
year’s fourth quarter due to lower net sales. This led to gross
profit margin of 46.1%, compared to 47.9% in the fourth quarter of
fiscal 2015.
Total operating expenses were $70.5 million for
the fourth quarter, compared to $73.2 million during last year’s
fourth quarter principally reflecting lower advertising
expenses.
Interest expense was $1.9 million for the fourth
quarter of fiscal 2016, comparable to the fourth quarter of fiscal
2015.
These factors resulted in a net loss of $6.9
million for the fourth quarter of fiscal 2016, or a net loss per
diluted share of $0.45, compared to a net income of $2.3 million,
or a net income per diluted share of $0.15 during last year’s
fourth quarter.
Balance Sheet and LiquidityCash
and cash equivalents were $7.5 million as of January 28, 2017,
compared to $5.6 million at January 30, 2016.
Net cash provided by operating activities during
the fifty-two weeks ended January 28, 2017 was approximately $19.3
million, compared with approximately $38.1 million provided by
operating activities during the prior year period. The decrease in
cash primarily reflected changes in working capital and increase in
our net loss.
Net cash used in investing activities was
approximately $3.1 million in the fifty-two weeks ended January 28,
2017, compared to $8.5 million in prior year period. The decrease
in cash used in investing activities resulted from fewer new
Perfumania store openings and renovations during the fifty-two
weeks ended January 28, 2017, compared with the fifty-two weeks
ended January 30, 2016.
The Company has a $175 million revolving credit
facility with a syndicate of banks, which is used for the Company's
general corporate purposes and those of its subsidiaries, including
working capital. The Company was in compliance with all financial
and operating covenants under the Senior Credit facility and as of
January 28, 2017, the Company had $94.7 million available to borrow
under the Senior Credit Facility.
About Perfumania Holdings,
Inc.Perfumania Holdings, Inc. (NASDAQ:PERF) is the largest
specialty retailer and distributor of fragrances and related beauty
products across the United States. Perfumania has a 30 year history
of innovative marketing and sales management, brand development,
license sourcing and wholesale distribution making it the premier
destination for fragrances and other beauty supplies. As of January
28, 2017 the Company operated 287 corporate-owned retail stores as
well as e-commerce, specializing in the sale of fragrances and
related products across the United States, Puerto Rico, and the
U.S. Virgin Islands. The Company also operates a wholesale
distribution network that addresses approximately 57,000 retail
doors. For additional information please visit
www.perfumaniaholdings.com or contact us at perf@jcir.com.
Forward-Looking StatementsThis
press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are typically identified by words or
phrases such as “may,” “will,” “anticipate,” “estimate,” “expect,”
“project,” “intend,” “plan,” “believe,” “target,” “forecast,”
“objective,” “assume,” “strategies” and other words and terms of
similar meaning. Forward-looking statements involve estimates,
expectations, projections, goals, forecasts, assumptions, risks and
uncertainties. We caution readers that any forward-looking
statement is not a guarantee of future performance and that actual
results could differ materially from those contained in the
forward-looking statement. Among the factors that could cause
actual results, performance or achievement to differ materially
from those described or implied in the forward-looking statements
are our ability to service our obligations, our ability to comply
with the covenants in our Senior Credit Facility, any deterioration
of general economic conditions, including weaker than anticipated
discretionary spending by consumers, competition, the ability to
raise additional capital to finance our expansion and other factors
included in our filings with the SEC. Copies of our SEC filings are
available from the SEC or may be obtained upon request from us. You
should also consider carefully the statements under “Risk Factors”
in our Form 10-K which address additional factors that could cause
our actual results to differ from those set forth in the
forward-looking statements and could materially and adversely
affect our business, operating results and financial condition. We
cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements. The forward-looking statements speak
only as of the date on which they are made, and, except to the
extent required by federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events.
PERFUMANIA HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
($ in thousands, except share and per share
amounts) |
|
|
|
|
|
|
January 28, 2017 |
January 30, 2016 |
ASSETS: |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$7,474 |
|
|
$5,640 |
|
Accounts
receivable, net of allowances of $2,267 and $1,233 as of
January |
|
|
25,572 |
|
|
|
29,602 |
|
28, 2017
and January 30, 2016, respectively |
|
Inventories |
|
|
196,654 |
|
|
|
221,336 |
|
Prepaid
expenses and other current assets |
|
|
10,619 |
|
|
|
9,862 |
|
Total
current assets |
|
|
240,319 |
|
|
|
266,440 |
|
Property and equipment,
net |
|
|
16,692 |
|
|
|
25,892 |
|
Goodwill |
|
|
38,769 |
|
|
|
38,769 |
|
Intangible and other
assets, net |
|
|
14,520 |
|
|
|
19,945 |
|
Total assets |
|
$310,300 |
|
|
$351,046 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
|
$28,605 |
|
|
$32,175 |
|
Accounts payable –
affiliates |
|
|
1,027 |
|
|
|
300 |
|
Accrued expenses and
other liabilities |
|
|
28,686 |
|
|
|
33,205 |
|
Current portion of
obligations under capital leases |
|
|
1,237 |
|
|
|
1,248 |
|
Total
current liabilities |
|
|
59,555 |
|
|
|
66,928 |
|
Revolving credit
facility |
|
|
— |
|
|
|
13,078 |
|
Notes payable –
affiliates |
|
|
125,366 |
|
|
|
125,366 |
|
Long-term portion of
obligations under capital leases |
|
|
— |
|
|
|
1,223 |
|
Other long-term
liabilities |
|
|
64,954 |
|
|
|
60,474 |
|
Total
liabilities |
|
|
249,875 |
|
|
|
267,069 |
|
Commitments and
contingencies |
|
|
|
|
Shareholders'
equity: |
|
|
|
|
Preferred stock, $0.10
par value, 1,000,000 shares authorized; as of January |
|
|
— |
|
|
|
— |
|
28, 2017
and January 30, 2016, none issued |
|
Common stock, $0.01 par
value, 35,000,000 shares authorized; 16,392,012 |
|
|
164 |
|
|
|
164 |
|
shares as
of January 28, 2017 and January 30, 2016 |
|
Additional paid-in
capital |
|
|
222,048 |
|
|
|
221,961 |
|
Accumulated
deficit |
|
|
(153,210 |
) |
|
|
(129,571 |
) |
Treasury stock, at
cost, 898,249 shares as of January 28, 2017 and January 30,
2016 |
|
|
(8,577 |
) |
|
|
(8,577 |
) |
Total
shareholders’ equity |
|
|
60,425 |
|
|
|
83,977 |
|
Total liabilities and shareholders’ equity |
|
$310,300 |
|
|
$351,046 |
|
PERFUMANIA HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
($ in thousands, except share and per
share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirteen Weeks Ended |
|
Fiscal Year Ended |
|
Fiscal Year Ended |
|
|
January 28, 2017 |
|
January 30, 2016 |
|
January 28, 2017 |
|
January 30, 2016 |
Net Sales |
|
$ |
141,523 |
|
|
$ |
162,473 |
|
$ |
468,865 |
|
|
$ |
541,964 |
|
Cost of goods sold |
|
|
76,252 |
|
|
|
84,668 |
|
|
247,533 |
|
|
|
284,340 |
|
Gross profit |
|
|
65,271 |
|
|
|
77,805 |
|
|
221,332 |
|
|
|
257,624 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Selling, general
and administrative expenses |
|
|
61,465 |
|
|
|
69,261 |
|
|
222,373 |
|
|
|
249,540 |
|
Asset
impairment |
|
|
6,945 |
|
|
|
1,032 |
|
|
6,945 |
|
|
|
1,032 |
|
Share-based
compensation expense |
|
|
34 |
|
|
|
80 |
|
|
87 |
|
|
|
297 |
|
Depreciation and
amortization |
|
|
2,013 |
|
|
|
2,830 |
|
|
8,622 |
|
|
|
10,784 |
|
Total operating expenses |
|
|
70,457 |
|
|
|
73,203 |
|
|
238,027 |
|
|
|
261,653 |
|
(Loss) income from
operations |
|
|
(5,186 |
) |
|
|
4,602 |
|
|
(16,695 |
) |
|
|
(4,029 |
) |
Interest expense |
|
|
1,913 |
|
|
|
1,887 |
|
|
7,143 |
|
|
|
7,191 |
|
(Loss) income before
income tax provision |
|
|
(7,099 |
) |
|
|
2,715 |
|
|
(23,838 |
) |
|
|
(11,220 |
) |
Income tax (benefit)
provision |
|
|
(199 |
) |
|
|
451 |
|
|
(199 |
) |
|
|
451 |
|
Net (loss) income |
|
$ |
(6,900 |
) |
|
$ |
2,264 |
|
$ |
(23,639 |
) |
|
$ |
(11,671 |
) |
Net (loss) income per
common share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.45 |
) |
|
$ |
0.15 |
|
$ |
(1.53 |
) |
|
$ |
(0.75 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
15,493,763 |
|
|
|
15,554,763 |
|
|
15,493,763 |
|
|
|
15,486,957 |
|
Diluted |
|
|
15,493,763 |
|
|
|
15,554,763 |
|
|
15,493,763 |
|
|
|
15,486,957 |
|
PERFUMANIA HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
($ in thousands) |
|
|
Fiscal Year |
|
Fiscal Year |
Ended |
Ended |
January 28, 2017 |
January 30, 2016 |
|
|
|
|
Cash flows from
operating activities: |
|
|
|
Net loss |
$ |
(23,639 |
) |
|
$ |
(11,671 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities: |
|
Asset Impairment |
|
6,945 |
|
|
|
1,032 |
|
Depreciation and
amortization |
|
8,622 |
|
|
|
10,784 |
|
Amortization of
deferred financing costs |
|
343 |
|
|
|
343 |
|
|
|
|
|
|
|
|
|
Provision (benefit) for
losses on accounts receivable |
|
1,716 |
|
|
|
(30 |
) |
Share-based
compensation |
|
87 |
|
|
|
297 |
|
Changes in operating
assets and liabilities: |
|
|
|
Accounts
receivable |
|
2,314 |
|
|
|
(1,795 |
) |
Inventories |
|
24,682 |
|
|
|
32,035 |
|
Prepaid expenses
and other assets |
|
1,076 |
|
|
|
5,409 |
|
Accounts
payable |
|
(3,570 |
) |
|
|
(7,088 |
) |
Accounts
payable-affiliates |
|
727 |
|
|
|
31 |
|
Accrued expenses
and other liabilities and other long-term liabilities |
|
(39 |
) |
|
|
8,763 |
|
Net cash provided by
operating activities |
|
19,264 |
|
|
|
38,110 |
|
Cash flows from
investing activities: |
|
|
|
Additions to
property and equipment |
|
(3,118 |
) |
|
|
(8,485 |
) |
Net cash used in
investing activities |
|
(3,118 |
) |
|
|
(8,485 |
) |
Cash flows from
financing activities: |
|
|
|
Net repayments
under bank line of credit |
|
(13,078 |
) |
|
|
(24,483 |
) |
Principal
payments under capital lease obligations |
|
(1,234 |
) |
|
|
(1,092 |
) |
Proceeds from
exercise of stock options and warrants |
|
— |
|
|
|
57 |
|
Net cash used in
financing activities |
|
(14,312 |
) |
|
|
(25,518 |
) |
Net increase in cash
and cash equivalents |
|
1,834 |
|
|
|
4,107 |
|
Cash and cash
equivalents at beginning of year |
|
5,640 |
|
|
|
1,533 |
|
Cash and cash
equivalents at end of year |
$ |
7,474 |
|
|
$ |
5,640 |
|
|
|
|
|
Supplemental
Information: |
|
|
|
Cash paid during the
period for: |
|
|
|
Interest |
$ |
1,153 |
|
|
$ |
1,567 |
|
Income
taxes |
$ |
278 |
|
|
$ |
634 |
|
Contact:
Perfumania Holdings, Inc.
Michael Katz
President and Chief Executive Officer
(631) 866-4156
JCIR
Joseph Jaffoni / Norberto Aja
(212) 835-8500
perf@jcir.com
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